Over the last few years hundreds of thousands of Americans have found that when they filed their tax return with the Internal Revenue Service that it was rejected. It wasn’t rejected because the return was wrong or anything of that nature; rather, it was rejected because a return had already been filed in their name. You may wonder what happens when someone has their identity stolen – this is one of the things that happens. When the lowlifes in our society get hold of your sensitive information such as your Social Security Number, they can, and many times do file tax returns on your behalf. To the IRS’ credit they have put measures in place to try to prevent this; and in addition, the IRS has worked with taxpayers who have been effected to make sure that they are made whole. However, this is a growing problem and all of us need to be aware of it.
This is a warning and a reminder to always protect your sensitive information. Just because someone asks you for your Social Security Number doesn’t mean you have to give it to them. My general view has always been I don’t give my SS number or other sensitive information out unless I get a pretty good reason why they need it. That being said, I bring this up because unfortunately, one way that the crooks get your information is through less than honorable tax preparers.
Just think, when you retain someone to complete your tax return, they have access to a tremendous amount of your information. Not only do they have your Social Security Number and your address, but they also have access to youW-2s, and 1099s. Because your tax preparer has so much information on you, it is important that you know who you’re dealing with and that they’re not someone that you hired just because they have the lowest fees.
There’s also another reason why you want to hire a tax preparer that is a true professional and that has a dedication to staying current with tax laws. It seems that tax laws change faster than the weather in Michigan, and therefore, it’s important that you have someone who stays current and up to date. Remember, you and I sign our tax returns and thus, we are the ones who are ultimately responsible. If your tax preparer crosses the line and takes deductions for example, you’re not entitled to, when the IRS catches up to you, which they generally will, you will be responsible not only for the additional taxes and interest, but also penalties.
Of course, that doesn’t mean that you should not use a preparer who’s aggressive in the fact that they take every deduction you’re entitled to. After all, you should pay the least amount of taxes you are legally obligated to pay. However, we all know the difference between being aggressive and breaking the law. Being aggressive is fine, breaking the law is not. As U.S. citizens, one of the obligations we have to our country is to file accurate tax returns. Therefore, if nothing more to be a good citizen in our country, it is important that your returns be fair and accurate.
I know the tendency is to automatically use the same person to do your return as you did last year. In many situations there is nothing wrong with that; however, it is important that you ask your preparer how they are staying current with the new tax laws and what procedures they have in place to protect your sensitive information. Remember, in a typical office there can be many people that potentially can have access to your sensitive information.
I wish we didn’t have to worry about identity theft. However, that’s sort of like driving with your eyes shut – it can be very dangerous. Therefore, as we enter the tax preparation season, take a few extra minutes to ask the right questions so you can increase the odds of having your return prepared correctly and that your sensitive and private information is being protected.
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at firstname.lastname@example.org.